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When High Security is a CEO Perk




When High Security is a CEO Perk
When High Security is a CEO Perk



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http://www2.csoonline.com/exclusives/column.html?CID=33337 

By Katherine Walsh
csoonline.com
Dec. 09, 2007  

Quick quiz: When does the CEO of a big technology company actually love 
security?

Answer: When the executive protection team decides that the CEO needs to 
travel by private jet or limo anytime, anywhere, whether alone or with 
family members--for security reasons.

According to an analysis of proxy statements filed with the Securities 
and Exchange Commission by the U.S.=E2=80=99s largest technology companies, 
corporate jets and automobiles are sometimes considered not luxury items 
or fringe benefits, but part of the necessary cost of executive 
protection--not a bad perk for the holiday season.

At IBM, the country=E2=80=99s largest technology company, "security practices 
provide that all air travel by the Chairman and CEO, including personal 
travel, be on Company aircraft,=E2=80=9D according to the most recent proxy 
statement. The CEO also is driven to and from work by IBM personnel in a 
car leased by IBM, which may also be used for non-business 
occasions--again, for security reasons. In all, the company spent 
$373,187 on CEO S.J. Palmisano=E2=80=99s personal use of company aircraft and 
$53,409 on personal security. This includes home security and monitoring 
systems, as well as security personnel for Palmisano and his family and 
the cost of hotels, meals, car services, airfare and salary for those 
security personnel. It=E2=80=99s a decent chunk of Palmisano=E2=80=99s total =E2=80=9Cother 
compensation=E2=80=9D of $922,530.

Likewise, at Xerox, CEO Ann Mulcahy is required whenever feasible to use 
the company aircraft for travel for =E2=80=9Csecurity and personal safety.=E2=80=9D 
Using this criteria, most of Mulcahy=E2=80=99s =E2=80=9Cother compensation=E2=80=9D can be 
classified as a security expense. Of the $296,026 listed under =E2=80=9Call 
other compensation=E2=80=9D for Mulcahy in the 2007 proxy statement, $193,300 
was spent on personal use of the corporate aircraft, and another $18,679 
went towards home security and other miscellaneous benefits. (=E2=80=9CAll other 
compensation=E2=80=9D typically includes things like matching 401(k) 
contributions, home relocation assistance, financial planning and other 
perquisites.)

In terms of security perks, however, those numbers aren=E2=80=99t even the big 
ones. Oracle reportedly spent a whopping $1,708,763 on security for CEO 
Larry Ellison. The proxy states that Ellison is required to have a home 
security system but is mum on most other details about what that $1.7 
million includes.

And Dell reports spending $1,051,000 on personal and residential 
security for CEO Michael Dell in FY07. According to the proxy statement: 
=E2=80=9CThe Board believes that Mr. Dell=E2=80=99s personal safety and security are of 
vital importance to the company=E2=80=99s business and prospects, and therefore 
that all these costs are appropriate corporate business expenses.=E2=80=9D 
Security services are also provided to members of Dell=E2=80=99s immediate 
family and to locations other than his primary residence.

Meanwhile, Cisco and Intel don=E2=80=99t even mention the words =E2=80=9Csecurity=E2=80=9D or 
=E2=80=9Cexecutive protection=E2=80=9D in the proxy statement section on executive 
compensation.

So does the fact that Oracle reportedly spent $1.7 million protecting 
its chief executive, Xerox spent less than $300,000, and Cisco doesn=E2=80=99t 
mention security at all mean that Oracle is the most paranoid technology 
company--or that Ellison is the safest CEO? Of course not.

For one thing, companies have vastly different interpretations of how 
they=E2=80=99re supposed to calculate and report executive protection costs=2E 
Dell and Oracle do consider personal use of the corporate aircraft to be 
part of executive compensation--they just don=E2=80=99t state that they consider 
it a security expense, as do IBM and Xerox.

Second, different companies and CEOs have different needs for security. 
=E2=80=9CThere is no one piece of security that should, without question, be 
implemented in every executive protection strategy,=E2=80=9D says Tim Horner, 
managing director at Kroll. Threat levels vary across company and 
industry, and companies must individualize their executive protection 
strategies as much as possible. (For in-depth coverage, see =E2=80=9CThe Six 
Things You Need to Know About Executive Protection.=E2=80=9D)

The threat environment of a particular corporation or CEO is dependant 
on a variety of factors, says Arnette Heintze, a retired U.S. Secret 
Service agent and now a security advisor at Hillard Heintze. One of 
those factors is corporate culture. =E2=80=9CThe CEO of a defense contractor 
might be exposed to greater risk through international travel than the 
CEO of a restaurant chain in the United States,=E2=80=9D he says.

Who the individual is also plays a big part in determining what to spend 
on executive protection. Henitze gives the example of celebrity CEO (now 
chairman) Bill Gates of Microsoft. =E2=80=9CThe security concerns there are not 
an issue so much because of the company and the industry, but because of 
the high profile of the executive,=E2=80=9D says Heintze.  =E2=80=9CExecutive security 
can=E2=80=99t be viewed just in one box.=E2=80=9D

So just how much money does Microsoft spend on protecting its top 
executives? Ironically, the company=E2=80=99s proxy statement is completely 
silent on the matter. And that might just make it the most paranoid tech 
company of all.


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